Under Armour Inc (NYSE: UA, UAA) stock soared nearly 10 percent on Tuesday after the company cleared a very low fourth-quarter earnings bar. However, analysts say Under Armour still has a long way to go to prove the company is back on track.
Excluding one-time items, Under Armour reported quarterly earnings per share of zero cents, in-line with analyst expectations. Quarterly revenue of $1.37 billion came in slightly above analyst estimates of $1.31 billion.
The good news for investors is that revenue growth crossed back into positive territory in the fourth quarter, up 5 percent from a year ago. International sales, which now represent 23 percent of total sales, were up 47 percent, providing some hope for long-term investors.
Apparel sales were up 2.5 percent, footwear sales were up 9.5 percent and accessories sales were up 6.1 percent. Direct-to-consumer sales also grew 11 percent on the quarter.
Under Armour has been combating a weak North American athletic apparel environment by restructuring its business and cutting roughly 2 percent of its global workforce.
“Our fourth quarter and full year results demonstrate that the tough decisions we’re making are generating the stability necessary to create a more consistent and predictable path to deliver long-term value to our shareholders,” CEO Kevin Plank says in a statement.
The company says it will incur restructuring charges of between $110 million and $130 million in 2018 due to lease terminations and store closures. Starting in 2019, the company expects to save roughly $75 million per year as a result of its restructuring efforts.
Despite an overall positive quarter, Under Armour still didn’t solve its North America problem, where overall sales dropped another 4 percent. Looking ahead to 2018, Under Armour is anticipating mid-single-digit sales declines to continue in North America, offset by at least 25 percent sales growth in international markets. Overall, the company is guiding for low-single-digit revenue growth.
Guggenheim Securities analyst Bob Drbul says the big move in Under Armour stock was simply due to mistrust of Under Armour’s previous guidance.
“The market was poised for a disappointment, they delivered what they said they were going to deliver and there was a lot of skepticism on their ability to do that” Drbul said on CNBC. “Inventories are…
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